How to Transfer an IRA to an Annuity
Jason Stolz CLTC, CRPC
How to Transfer an IRA to an Annuity is one of the most common questions retirees ask when exploring ways to create guaranteed lifetime income. Fortunately, the process can be done without taxes or penalties when structured properly as a direct transfer or trustee-to-trustee rollover. This guide explains how to move IRA funds into an annuity, what steps to follow, which tax rules to watch, and how an annuity can strengthen your retirement income plan.
At Diversified Insurance Brokers, our advisors help clients nationwide complete direct transfers every week—ensuring funds stay tax-deferred and immediately begin earning guaranteed interest or indexed growth. Whether your goal is accumulation, income, or principal protection, there’s an annuity designed to fit your IRA strategy.
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Why Transfer an IRA to an Annuity?
IRAs are powerful accumulation vehicles—but they don’t provide guaranteed income. By transferring part or all of your IRA balance into an annuity, you can lock in predictable income, reduce market risk, and continue tax-deferred growth. Annuities also offer optional income riders, joint-life benefits, and principal guarantees that standard IRA investments lack.
- Guaranteed income: Convert savings into a reliable monthly paycheck for life.
- Protection from market losses: Fixed or fixed indexed annuities preserve principal even in downturns.
- Tax-deferred growth: Funds remain tax-advantaged until distributed.
- Estate planning benefits: Name beneficiaries directly, avoiding probate delays.
- RMD flexibility: Many annuities automatically satisfy Required Minimum Distributions (RMDs).
How the IRA-to-Annuity Transfer Works
The key to a smooth transfer is ensuring your IRA custodian sends the funds directly to the new annuity company—without you taking possession. This is called a trustee-to-trustee transfer or direct rollover. It’s not taxable, there’s no 60-day window, and the IRS does not limit the number of direct transfers per year.
| Step | Action | Key Benefit |
|---|---|---|
| 1. Choose your annuity | Fixed, MYGA, fixed indexed, or immediate income annuity. | Aligns payout style and guarantees to your goals. |
| 2. Complete transfer form | Your advisor submits IRA transfer paperwork to both custodians. | Ensures tax-free direct movement of funds. |
| 3. Funds move directly | Old custodian issues check payable to new insurer—not to you. | Avoids 60-day rule and penalties. |
| 4. Contract issued | Funds deposited and your annuity contract begins accruing interest. | You begin tax-deferred accumulation or income payouts. |
For step-by-step visuals, see What Is a Direct Rollover?
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Types of IRA Transfers to Annuities
- Traditional IRA → Qualified Annuity: Continues tax deferral; withdrawals taxed as income.
- Roth IRA → Roth Annuity: No current taxes, and qualified income can be tax-free later.
- SEP or SIMPLE IRA → Annuity: Employer-sponsored IRAs can roll to personal ownership once eligible.
Each annuity type—fixed indexed annuity, MYGA, or immediate—has distinct benefits. Our advisors compare rates and riders from over 75 carriers to ensure your IRA dollars are positioned for both safety and income efficiency.
Tax Rules for IRA Transfers
A properly executed transfer keeps your money within the qualified system—no 1099-R, no penalties, and no taxable distribution. However, if you receive the check personally and fail to redeposit it within 60 days, it becomes a taxable event (and potentially subject to early withdrawal penalties if under 59½).
To stay compliant, always let the new annuity custodian request funds directly. For Roth IRAs, confirm that your new annuity is coded correctly to maintain Roth tax treatment.
Benefits of Converting Part of an IRA to an Annuity
- Income stability: Eliminate longevity risk with guaranteed lifetime payouts.
- Diversification: Balance riskier investments with a protected income component.
- Spousal continuation: Joint payout options ensure protection for both spouses.
- Custom timing: Defer income until retirement or activate immediately with an income annuity.
When structured properly, the annuity becomes your personal pension—working alongside Social Security and other income sources. For comparisons, see How Much Income Does an Annuity Pay?
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FAQs: Transferring an IRA to an Annuity
Is transferring an IRA to an annuity taxable?
No. A direct transfer (trustee-to-trustee) keeps your funds within the qualified system and remains tax-deferred. The IRS treats it as a non-reportable movement, not a withdrawal.
What’s the difference between a transfer and a rollover?
A transfer moves funds directly between custodians. A rollover involves you receiving the funds first—creating a 60-day deadline and potential withholding. Transfers are safer and simpler.
Can I transfer a Roth IRA to an annuity?
Yes. Roth IRAs can transfer into Roth-designated annuities, preserving their tax-free growth and withdrawal advantages.
Will an annuity affect my Required Minimum Distributions?
Yes, but most annuities can accommodate RMDs automatically. Some riders even integrate RMD withdrawals into income payments.
Can I move only part of my IRA into an annuity?
Absolutely. Many clients transfer a portion of their IRA—creating guaranteed income while keeping the rest invested in market-based assets.
Are there fees to transfer my IRA to an annuity?
Most custodians don’t charge for direct transfers. However, check for surrender charges or fees in your current IRA investments before moving funds.
What type of annuity is best for IRA money?
It depends on your goal: MYGAs for guaranteed rates, fixed indexed for growth potential with protection, or immediate annuities for income now. We’ll compare options based on your age, state, and objectives.
